The failure of European Central Bank President Mario
Draghi to hint at any further easing in monetary policy weighed on stock
markets Thursday but shored up the euro as attention turned towards key
U.S. jobs figures.
Following the ECB's widely expected decision to keep its main interest rate unchanged at the record low of 0.5 percent, Draghi did not signal any further measures to boost the ailing eurozone economy, which has been in recession for the past six quarters.
Even though the ECB cut its 2013 growth and inflation forecasts for the 17-country eurozone, Draghi said the governing council felt there was no reason to act now, especially as the recent data suggest an easing in the current economic conditions. The ECB even upgraded its growth forecast for the eurozone for next year to 1.1 percent.
"We reckon currency traders are now feeling a little braver in their assertion that it will be harder to squeeze more blood out of this stone," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.
The euro was firm, trading 0.8 percent higher at $1.3193. It spent much of last month below $1.30 as investors priced in expectations of more support from the ECB, possibly in the form of another interest rate cut.
Draghi's remarks weighed on the bond prices of some of the eurozone's more indebted countries — the yield on the ten-year bonds of both Spain and Italy both rose by around 0.20 percentage points to 4.65 percent and 4.30 percent, respectively. Portugal's was up 0.20 percentage points to 5.97 percent, while Greece's rose 0.09 percentage points to 9.25 percent.
The rise in the yields helped choke off earlier gains in European stock markets as it showed investors remain concerned about those countries' debt and are disappointed that the ECB is unlikely to ease policy further. Lower interest rates or other measures to loosen monetary policy tend to boost economic activity.
Germany's DAX closed down 1.2 percent to 8,098.81 while the CAC-40 in France fell 1 percent to 3,814.28. The FTSE 100 index of leading British shares ended 1.3 percent lower at 6,336.11 following the Bank of England's decision to keep its monetary policy unchanged.
Trading on a number of European exchanges started about an hour late Thursday after a problem with NYSE Euronext's systems prevented customers from placing orders. Exchanges in Paris, Lisbon, Brussels and Amsterdam were affected by the unexplained glitch.
In the U.S., the Dow Jones industrial average was down 0.1 percent at 14,955 while the broader S&P 500 index rose the equivalent rate to 1,611.
Now that the ECB meeting is out of the way, the focus in the markets is on Friday's nonfarm payrolls data. An 11,000 fall in weekly jobless claims to 346,000 was in line with expectations and did little to alter predictions for Friday's report. The consensus in the markets is that payrolls rose about 165,000 in May.
"Traders may be tempted to sit on their hands in the short term," said Mike McCudden, head of derivatives at Interactive Investor.
This week's economic news out of the U.S. has been disappointing and investors now think it's less likely that the Fed will decide to reduce the amount of financial assets it has been buying in the markets in the hope of stimulating the U.S. economy.
Fed chief Ben Bernanke has said the U.S. central bank might pull back on its $85 billion-a-month bond-buying program as economic data improves. But other Fed officials have spoken about a winding down of asset purchases sooner. The uncertainty over a possible tapering of the stimulus has been a cause for concern for many stock investors over the past couple of weeks.
The purchases have been one of the main drivers in financial markets in recent years and have contributed to the rise in many global indexes to record highs.
In Asia, markets responded to the weakness experienced the previous day in Europe and the U.S. The Nikkei closed down 0.9 percent at 12,904.02. That's on top of Wednesday's 3.8 percent fall. Hong Kong's Hang Seng fell 1.1 percent to 21,838.43, while Shanghai's main index dropped 1.3 percent to 2,346.80. Markets in South Korea were closed for a public holiday.
Following the ECB's widely expected decision to keep its main interest rate unchanged at the record low of 0.5 percent, Draghi did not signal any further measures to boost the ailing eurozone economy, which has been in recession for the past six quarters.
Even though the ECB cut its 2013 growth and inflation forecasts for the 17-country eurozone, Draghi said the governing council felt there was no reason to act now, especially as the recent data suggest an easing in the current economic conditions. The ECB even upgraded its growth forecast for the eurozone for next year to 1.1 percent.
"We reckon currency traders are now feeling a little braver in their assertion that it will be harder to squeeze more blood out of this stone," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.
The euro was firm, trading 0.8 percent higher at $1.3193. It spent much of last month below $1.30 as investors priced in expectations of more support from the ECB, possibly in the form of another interest rate cut.
Draghi's remarks weighed on the bond prices of some of the eurozone's more indebted countries — the yield on the ten-year bonds of both Spain and Italy both rose by around 0.20 percentage points to 4.65 percent and 4.30 percent, respectively. Portugal's was up 0.20 percentage points to 5.97 percent, while Greece's rose 0.09 percentage points to 9.25 percent.
The rise in the yields helped choke off earlier gains in European stock markets as it showed investors remain concerned about those countries' debt and are disappointed that the ECB is unlikely to ease policy further. Lower interest rates or other measures to loosen monetary policy tend to boost economic activity.
Germany's DAX closed down 1.2 percent to 8,098.81 while the CAC-40 in France fell 1 percent to 3,814.28. The FTSE 100 index of leading British shares ended 1.3 percent lower at 6,336.11 following the Bank of England's decision to keep its monetary policy unchanged.
Trading on a number of European exchanges started about an hour late Thursday after a problem with NYSE Euronext's systems prevented customers from placing orders. Exchanges in Paris, Lisbon, Brussels and Amsterdam were affected by the unexplained glitch.
In the U.S., the Dow Jones industrial average was down 0.1 percent at 14,955 while the broader S&P 500 index rose the equivalent rate to 1,611.
Now that the ECB meeting is out of the way, the focus in the markets is on Friday's nonfarm payrolls data. An 11,000 fall in weekly jobless claims to 346,000 was in line with expectations and did little to alter predictions for Friday's report. The consensus in the markets is that payrolls rose about 165,000 in May.
"Traders may be tempted to sit on their hands in the short term," said Mike McCudden, head of derivatives at Interactive Investor.
This week's economic news out of the U.S. has been disappointing and investors now think it's less likely that the Fed will decide to reduce the amount of financial assets it has been buying in the markets in the hope of stimulating the U.S. economy.
Fed chief Ben Bernanke has said the U.S. central bank might pull back on its $85 billion-a-month bond-buying program as economic data improves. But other Fed officials have spoken about a winding down of asset purchases sooner. The uncertainty over a possible tapering of the stimulus has been a cause for concern for many stock investors over the past couple of weeks.
The purchases have been one of the main drivers in financial markets in recent years and have contributed to the rise in many global indexes to record highs.
In Asia, markets responded to the weakness experienced the previous day in Europe and the U.S. The Nikkei closed down 0.9 percent at 12,904.02. That's on top of Wednesday's 3.8 percent fall. Hong Kong's Hang Seng fell 1.1 percent to 21,838.43, while Shanghai's main index dropped 1.3 percent to 2,346.80. Markets in South Korea were closed for a public holiday.
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